Busi 530 Corporate Finance McGraw Hill Connect Home work 8
(Not rated)
(Not rated)
The expected pretax return on three stocks is divided between dividends and capital gains in the following way:
Stock Expected
Dividend Expected
Capital Gain
A $0 $28
B 14 14
C 28 0
a.
If each stock is priced at $100, what are the expected net returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 35%, and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Stock Pension Investor
Corporation Individual
A % % %
B % % %
C % % %
b.
Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an 10% return after tax, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Stock P0
A $
B
C
- 9 years ago
For Vivia Only
NOT RATED
Purchase the answer to view it
Corporate Finance Question from McGraw Hill Connect Homework 11
NOT RATEDThe expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend Expected Capital Gain A $0 $36 B …
9 years ago